FIRST FEDERAL SAVINGS BANK v. TOMMY LEE MCCUBBINS
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RENDERED: April 15, 2005; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-001778-MR
FIRST FEDERAL SAVINGS BANK
APPELLANT
APPEAL FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 04-CI-00206
v.
TOMMY LEE MCCUBBINS
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
GUIDUGLI AND MINTON, JUDGES; EMBERTON, SENIOR JUDGE.1
GUIDUGLI, JUDGE:
In this action to collect an alleged unpaid
balance due on a Note, First Federal Savings Bank (hereinafter
“the Bank”) has appealed from the Bullitt Circuit Court’s August
13, 2004, Order granting Tommy Lee McCubbins’ motion for summary
judgment.
1
We affirm.
Senior Judge Thomas D. Emberton, sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 100(5)(b) of the Kentucky Constitution
and KRS 21.580.
On May 11, 1978, McCubbins and his wife, who is now
deceased, obtained a loan in the amount of $16,000 from Bullitt
Federal Savings and Loan Association, the predecessor of the
Bank.
The loan was secured by a mortgage on their residence in
Lebanon Junction, Kentucky.
They signed a Note on the same date
indicating that they would pay the amount of $135.37 per month
starting June 1, 1978, and continue paying until the Note was
paid, or May 1, 2003.
On October 19, 1978, McCubbins and his
wife obtained a second loan in the amount of $1,600, which was
for the same term as the previous loan.
The new loan amount
($14.41 per month) was added to their previous loan amount, for
a total of $176.39 per month, including the monthly escrow
payment.
In the summer of 2002, McCubbins, thinking that his
loan was ready to be paid off, went to the Bank with his
daughter to inquire into its status.
He was informed that the
payoff amount was $20.41, which he paid on July 3, 2002.
He
received a letter of the same date from Loan Administrator
Leticha Ellis regarding his “recently paid loan” and enclosing
the Note dated May 1, 1978, stamped “PAID IN FULL” on July 3,
2002, as well as the Mortgage on his property entered into on
May 1, 1978, also stamped “PAID IN FULL” on July 3, 2002.
The
Mortgage, as did the letter, referenced loan number 601001397.
On July 25, 2002, a Deed of Release of the Mortgage signed by
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the Bank’s Senior Vice President Alan R. Howell was recorded in
the Bullitt County Clerk’s records.
On February 27, 2004, close to two years later, the
Bank filed suit against McCubbins to recover a balance in the
amount of $6,547 it claimed he owed on the Note.
McCubbins
filed an answer and counterclaim, asserting that the Note had
been paid in full and that the Bank had never provided a payment
history as he requested.
He attached copies of the Note and
Mortgage stamped “PAID IN FULL” sent to him by the Bank, as well
as the Deed of Release, to support his claim that the debt had
been paid in full.
For his counterclaim, McCubbins alleged
claims of breach of contract, fraud, outrageous conduct, and
violations of the unfair business practices act.
The
counterclaim is still pending below.
In discovery, the Bank was requested to produce, and
did produce, its loan file for McCubbins and its loan history on
the Note at issue.
McCubbins then filed a motion for summary
judgment, arguing that the Bank discharged his obligation under
the Note pursuant to KRS 355.3-604(1)(a) by a voluntary and
intentional act and pointing out that the loan history only
dated back to January 4, 1999, while the loan dated back to
1978.
The Bank objected to the motion, and while admitting that
it mailed the original Note and Mortgage stamped “PAID IN FULL”
to McCubbins and filed the Deed of Release, it maintained that
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those actions were clerical errors on the part of its employees.
There was no intention to release McCubbins from his obligation
on the $16,000 Note.
Rather, the Bank asserted that McCubbins
had only paid off the $1,600 loan.
In sum, the Bank argued that
there remained a factual issue as to whether the Bank
intentionally and voluntarily released McCubbins from his
obligation to pay the remaining balance allegedly due on the
$16,000 loan.
In support, the Bank attached an affidavit from
Recovery and Preservation officer David G. Bush, who indicated
in the affidavit that only the smaller loan had been paid off
and that the Bank had mistakenly mailed the original of the
larger Note along with the Mortgage and released the Mortgage
securing the Note.
In reply, McCubbins reiterated that he still
had not received a full payment history from the Bank and that
the Bank had not provided any affidavits from those responsible
for discharging the Note and Mortgage or for causing the Deed of
Release to be recorded.
On August 13, 2004, the circuit court entered the
following Order:
The Defendant, Tommy McCubbins, having
moved the Court for Summary Judgment in his
favor on the Plaintiff’s claims and the
Court having reviewed the evidence of record
and having held a hearing on this Motion and
having found that the bank acknowledged on
July 3, 2002[,] that Mr. McCubbins had paid
the final payment on the Note and further
that the Plaintiff had provided the
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Defendant with the original Note marked
“PAID IN FULL” and the Mortgage marked “PAID
IN FULL” and that the Plaintiff also filed a
Deed of Release, and further that the
Plaintiff does not have a payment history on
the subject Note for the years 1978 through
January 1, 1999;
IT IS HEREBY FOUND AND ADJUDGED that in
accordance with KRS 355.3-604(1)(a) the
Plaintiff discharged the obligation of Mr.
McCubbins, if any, by its intentional
voluntary acts, including the surrender of
the Mortgage and Note to the party together
with letters indicating that he had paid the
Note in full. These acts show intentional
and voluntary acts on the part of the
Plaintiff to discharge the Defendant from
any obligation under the Note.
This is a final and appealable judgment
and there is no just cause for the delay of
its entry.
This appeal followed.
On appeal, the Bank continues to argue that the issue
as to whether its discharge of McCubbins’ liability was
intentional and voluntary remained a disputed fact.
On the
other hand, McCubbins asserts that the Bank did not establish
that any disputed facts existed because it could not establish
that any debt actually remained to be paid.
In Lewis v. B&R Corporation,2 this Court addressed the
standard of review applicable in an appeal from the entry of a
summary judgment:
2
56 S.W.3d 432, 436 (Ky.App. 2001).
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The standard of review on appeal when a
trial court grants a motion for summary
judgment is “whether the trial court
correctly found that there were no genuine
issues as to any material fact and that the
moving party was entitled to judgment as a
matter of law.”3 The trial court must view
the evidence in the light most favorable to
the nonmoving party, and summary judgment
should be granted only if it appears
impossible that the nonmoving party will be
able to produce evidence at trial warranting
a judgment in his favor.[] The moving party
bears the initial burden of showing that no
genuine issue of material fact exists, and
then the burden shifts to the party opposing
summary judgment to present “at least some
affirmative evidence showing that there is a
genuine issue of material fact for trial.”4
. . . Because summary judgment involves only
legal questions and the existence of any
disputed material issues of fact, an
appellate court need not defer to the trial
court’s decision and will review the issue
de novo.[]
With this standard in mind, we shall review the circuit court’s
Order.
Our decision in this case is based upon the
application of KRS 355.3-604(1), which provides:
A person entitled to enforce an instrument,
with or without consideration, may discharge
the obligation of a party to pay the
instrument:
3
Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996); Palmer v.
International Ass'n of Machinists & Aerospace Workers, 882 S.W.2d 117, 120
(Ky. 1994); CR 56.03. (Footnote 4 in original).
4
Steelvest, 807 S.W.2d at 482. See also Hubble v. Johnson, 841 S.W.2d 169,
171 (Ky. 1992); Hibbitts v. Cumberland Valley Nat’l Bank & Trust Co., 977
S.W.2d 252, 253 (Ky.App. 1998). (Footnote 6 in original).
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(a)
By an intentional voluntary act,
such as surrender of the
instrument to the party,
destruction, mutilation, or
cancellation of the instrument,
cancellation or striking out of
the party’s signature, or the
addition of words to the
instrument indicating discharge.
The Bank has not claimed that any type of fraud was involved,
which would have negated the Bank’s action in discharging the
alleged indebtedness on the note.5
What the Bank has argued is
that that its discharge of McCubbins’ obligation was neither
voluntary nor intentional, and that therefore a disputed factual
issue remains.
We disagree for two reasons.
First, it does not appear that the Bank met its burden
of bringing forward at least some affirmative evidence to
dispute McCubbins’ evidence that the debt had been fully paid.
McCubbins provided the Note and Mortgage stamped “PAID IN FULL”
he received from the Bank and the Deed of Release.
The Bank
only produced an affidavit from bank officer David G. Bush,
whose role in the situation is unknown.
Although he indicated
that he had personal knowledge of the circumstances, the
affidavit fails to indicate how he was involved.
Moreover,
neither the loan officer who sent the letter to McCubbins along
with the stamped Note and Mortgage nor the vice president who
signed the Deed of Release provided any type of testimony or
5
Citizens Fidelity Bank & Trust Co. v. Stark, 431 S.W.2d 722 (Ky. 1968).
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evidence in this matter.
The affidavit is not enough, in and of
itself, to meet the Bank’s burden to establish that there is an
undecided material factual issue.6
The Bank relies upon this Court’s decision in
Richardson v. First Nat’l Bank of Louisville7 to argue that its
action in discharging McCubbins’ obligation was not intentional,
but rather was a clerical error.
In Richardson, the bank
mistakenly informed the appellants in December 1980 that a note
had been paid off.
The following April, only four months later,
the bank realized its mistake and filed suit to recover the
amount due on the note.
In that case, the Court examined KRS
355.3-605(a)(1)8 and found substantial evidence in the record to
establish that the bank did not have the requisite intent to
cancel the note.
It held that a clerk’s stamping a note
“canceled” or “paid” does not establish that intent when a note
has not in fact been paid,9 and stated, “once the appellee filed
an affidavit stating that a remaining indebtedness existed on
the note, it was incumbent upon the appellants to file a
counter-affidavit disputing such a statement.”10
6
Steelvest, 807 S.W.2d at 482.
7
660 S.W.2d 678 (Ky.App. 1983).
8
The current version of KRS 355.3-604 is analogous to former KRS 355.3-605.
9
Id. at 679.
10
Id. at 680.
-8-
While at first blush Richardson appears to be
controlling here, we hold that it is not.
The most obvious
In Richardson, the bank wasted
difference is the time element.
little time in recognizing its error and filing suit to recover
the balance due, while in the present case, the Bank waited over
twenty months before filing suit.
Furthermore, unlike in
Richardson, McCubbins most certainly presented both documentary
evidence and affidavits to establish that the Note at issue had
been paid off.
Second, we agree with McCubbins that the Bank cannot
establish that a debt is even owed.
The Bank never provided a
full payment or loan history prior to 1999 either before suit
was filed or as a response to discovery requests in the present
suit.
As the Note dated back to 1978, over twenty years of
payment history are missing.
In Keeton v. Kennedy,11 the former
Court of Appeals stated:
[I]t is the general rule that when the maker
of a note admits its execution and pleads
payment, the burden is on him to prove
payment. However, when the maker of the
note pleads payment and files with his
answer the receipt of the payee showing
payment and satisfaction in full, the burden
then shifts to the payee. (Emphasis added.)
Here, McCubbins pleaded payment and provided the Note and
Mortgage stamped “PAID IN FULL”, both of which he received from
11
174 S.W.2d 781, 783 (Ky. 1943).
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the Bank, as well as a Deed of Release for the Mortgage.
The
Bank could only provide a payment history dating back to 1999.
While this may have something to do with its taking over of the
original bank, the Bank cannot meet its burden and establish
that any debt remained when it cannot produce records reflecting
the full payment history of the loan.
Therefore, there can be
no disputed facts on this issue, and the Bank’s action must fail
as a matter of law.
For the foregoing reasons, the Order of the Bullitt
Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Russell Sizemore
Elizabethtown, KY
John F. Carroll
Shepherdsville, KY
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